Wednesday, 3 October 2012

What is wages? Differentiate between nominal wages and real wages




Wages are remuneration paid to labour in return for service rendered.

 According to benham:

 A sum of money paid under contract by an employment to a worker in exchange for service rendered.”

            This is not a better definition, as it does not include the service of some independent workers such as doctors, traders etc as they do not work under contract. The better definition of wages as “remuneration paid to labour in return for service rendered either under contract or independently”

Nominal wage: 

Nominal wage mean the total amount of money earned by a worker during a certain period. E.g. if Aslam received Rs 20,000 at the end a month is his nominal wage.

Real wage: 

Real wages refer to the total amount of satisfaction which a worker receives in the form of necessities< comfort and luxuries in return for the services. Real wages include money wages other facilities, like free clothing, free housing, free accommodation, free electricity etc.

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